"European autumn
The hot news earlier in the year was the Arab
spring. Now the dominant story is
faltering leadership in Europe. Do the
two phenomena have more in common than it looks at first sight?
The other big political story of the year has been of
western leadership failing to measure up to the challenges of the eurozone
crisis; while the extent of gridlock in the US was exposed by the debt ceiling wrangling.
Huge issues are in play in Europe. But one issue that is being exposed is the
extent to which the euro, as an elite political project, has few popular roots
in the countries that are now being asked to write the cheques to “save” the
struggling southern economies. There
are some interesting lessons to learn.
Economists would always say that a 17 member euro would
struggle to meet the tests of an optimal currency area. The case for a Benelux + Germany with
possible additions of some Scandinavians (who opted to stay out), possibly
Switzerland and maybe France could be strong.
Adding in Spain, Portugal and Italy was a stretch. Ireland was always a risk without the UK
inside. Greece a bridge too far.
To make it work, it would have to be underpinned, as people
are now pointing out, by a massive deepening of European governance
arrangements – not just a central bank, but a European Finance Minister,
extensive transfers and an ability to set fiscal policy at European not
national level. But the leaders who
created the euro knew that, while people might be up for the benefits of a
single currency, they were not up for that degree of surrender of national
sovereignty. And so that was a
conversation that leader after leader refused to have with their people before
the single currency was created.
The single currency also needed stronger central
institutions to enforce the rules – most notably on the German-inspired
Stability Pact. The fact that France and
Germany went unpunished for breaching the rules sent an important message on
the balance of power between individual states and the centre. At the same time, the decision to go for 2nd
division players as the president and high representative respectively again
reinforced the determination to maintain that this was a Europe of nations.
Which was fine – in a benign economic climate. But now we are seeing Europe struggle to cope
with the extraordinary political demands on it. There is no politically
legitimate leadership from the centre – apart from in the ECB. At the same time, the leaders of the strong
northern states, are hamstrung by the knowledge of the limited political
appetite to make sacrifices for the euro.
People allowed their leaders to engage in their grand projet on the
basis of a bit more economic growth and a bit less hassle when travelling – on
the basis of their assurances that this was a no risk enterprise. Now we see a huge fissure opening up between
what leaders think might need to be done to “save” the euro (or more accurately
the banks that leant to Greece on the assumption it was Germany) and the price
voters are willing to pay.
The European autumn reflects the gap between leaders and
people. Exactly what was exposed by the
Arab spring".
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